Notice of future termination is adverse action even if revoked before effective date

Extrapolating from Supreme Court cases applying the “notice rule” for when a cause of action accrues, the Second Circuit held that a notice of termination on a future date is an adverse employment action, even if rescinded before that date. Consequently, a lower court erred in dismissing Title VII sex discrimination and FMLA interference claims by a then-pregnant synagogue employee who was issued a notice that she would be terminated in three weeks, only to have the termination revoked after she retained an attorney. Vacating in part and affirming in part, the appeals court agreed with the lower court that remarks about premarital pregnancy and other alleged discriminatory actions after the notice of termination were not enough to support a constructive discharge claim or a hostile work environment claim (Shultz v. Congregation Shearith Israel of the City of New York, August 10, 2017, Lynch, G.).

The employee worked for over 10 years as the program director for a Jewish synagogue in New York City. She was married on June 28, 2015, at which time she was pregnant. Before leaving for her honeymoon, she told the executive director that she was pregnant and asked her to inform the congregation’s rabbis. She returned, visibly pregnant, on July 20 and the next day had an extensive discussion with the executive director about the pregnancy.

Terminated, not. Later that day they met again, along with a rabbi and a board member, and the employee was told her employment was terminated effective August 14 in a “restructuring.” She responded that it would be very difficult to find a new job while visibly pregnant, but she “was met with complete silence.” She was given a severance agreement offering six weeks of pay in exchange for a waiver of her right to sue for pregnancy or gender discrimination, or for FMLA violations. She refused and retained counsel, who notified the Congregation’s counsel of the retainer on July 30. A few days later, on August 5, the executive director gave the employee a letter stating the employee was “reinstated” and so would not be terminated. The employee claimed this was “not a bona fide offer of unconditional reinstatement.”

Subsequent discrimination. Thereafter, the employee was allegedly subjected to repeated discrimination by the executive director, rabbi, and board member, including: loudly stating the congregation “had a right” to disapprove of her pre-marital pregnancy; her name was removed from the congregation’s newsletters and from the employee list displayed outside the synagogue; she was still required to complete assigned tasks and transition responsibilities to others before the originally scheduled termination; and the board member and rabbi refused to speak to her. She did not return to work after August 14 and did not deposit the paychecks she received thereafter.

Lawsuit. The employee filed this suit on September 22 and the congregation emailed its membership on September 25, denying her allegations and stating that she had not been terminated and her claim of loss was “fabricated.” The court dismissed her Title VII claims of sex discrimination and retaliation, and FMLA interference, and it declined to exercise jurisdiction over her claims under state and city law.

Notice of termination was adverse action, even if rescinded. Vacating in part, the appeals court found the district court erred in finding that a rescinded termination does not constitute an adverse employment action under Title VII. Though the Second Circuit had not yet addressed this issue, it found the answer from Supreme Court cases holding, “for purposes of a statute of limitations, a notice of termination was actionable at the point when ‘the operative decision was made—and notice given—in advance of a designated date on which employment terminated.’”

Under this “notice rule,” a claim accrues on notice of termination, not upon implementation of the decision, which necessarily implies that the notice itself is an adverse employment action. To the appeals court, it followed that trying to rescind the notice after the claim accrued could not eliminate the adverse employment action that already occurred or negate the accrued claim. Thus, notice of termination is an adverse action even when it is later rescinded.

Rescission relevant to damages though. That said, the appeals court explained that rescinding a termination—regardless of whether motivated by a genuine change of heart—has consequences that come into play in the calculation of damages. Specifically, an employee cannot recover back pay for a period of unemployment caused by an unreasonable rejection of a good-faith, unconditional offer to restore a position. Whether the offer here was made in good faith and whether the employee acted reasonably in refusing to return would be questions for the finder of fact.

Context matters. The court also noted that the holding was based on the facts, including that the termination was not revoked until two weeks after notice was given, so the employee had ample time to experience losing her job at a vulnerable time. The analysis might be different where, for example, an impulsive “You’re fired” was followed immediately by revocation of the firing.

FMLA interference claim also revived. For essentially the same reasons, the appeals court vacated the dismissal of the employee’s claim that firing her while she was pregnant interfered with her FMLA rights. The court saw no reason to construe the FMLA differently from Title VII as to whether the rescission of a notice of termination establishes that the notice is not an adverse employment action sufficient to deter or interfere with the exercise of FMLA rights.

Other claims fail. While the appeals court suggested the district court, on remand, reconsider whether to exercise jurisdiction over the employee’s state- and city-law claims, it affirmed the dismissal of the constructive discharge, hostile work environment, and retaliation claims. In its view, the employee did not plead sufficient facts arising after the notice of termination to establish that a reasonable person would have been compelled to resign, nor that she suffered a sufficiently severe and pervasive hostile work environment. Her retaliation claim failed because she did not allege an adverse employment action that took place after she retained counsel.

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